14 ent info_sys

Enterprise Information Systems
October 31, 2005
Jayakanth “JK” Srinivasan

Overview

• Impact of Computing
• Deciphering the alphabet soup
• Role of Information Systems
• Case Study – Product Data Management
• Challenges in Enterprise Integration
http://lean.mit.edu © 2005 Massachusetts Institute of Technology JK/October 31st 2005 - 2

Complex Processing Circa 1949

http://www.dfrc.nasa.gov/Gallery/Photo/People/HTML/E49-0053.html

Interesting Quotes

"This 'telephone' has too many shortcomings to be seriously considered as a
means of communication. The device is inherently of no value to us."
Western Union internal memo, 1876.
"Computers in the future may weigh no more than 1.5 tons.“ - Popular Mechanics,
forecasting the relentless march of science, 1949
"I think there is a world market for maybe five computers.“ - Thomas Watson, chairman of
IBM, 1943
"I have travelled the length and breadth of this country and talked with the best
people, and I can assure you that data processing is a fad that won't last out
the year.“ - The editor in charge of business books for Prentice Hall, 1957
"But what ... is it good for?"
Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on the microchip.
"There is no reason anyone would want a computer in their home."
Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

From Data to Wisdom

• Data: raw material, unformatted information

• Information: processed data → meaningful

• Knowledge: understanding relationships
between pieces of information
• Wisdom: knowledge accumulated and applied

Deciphering the Alphabet Soup

• IT - structurally and operationally enable and
facilitate information systems
• ITC - structurally and operationally enable and
facilitate information systems AND
communication
• IS - An organized combination of people, physical
devices, information processing instructions,
communications channels, and stored data that
gathers, stores, uses and disseminates information in
an organization

Components of an Information System

Process
Data People
Information System
Hardware Technology
Software
Telecom

Information System Usage

Planning
Horizon
Long
Term
the organization, on changes in these objectives, on
Strategic Information Systems
“Management control is the process by which
managers assure that resources are obtained
and used effectively and efficiently in the
objectives”
Management Information Systems
Operational Planning and Control
Tactical Planning and
Management Control
Strategic
Planning
Strategic planning: process of deciding on objectives of
the resources used to attain these objectives, and
disposition of these resources”
accomplishment of the organization’s
Short
Term
“ Operational control is the process of

assuring that specific tasks are carried

out effectively and efficiently”

Transaction Processing Systems

Evolution of IS

Inward Focus
• Operations Support Systems
• TPS – Transaction Processing Systems
• PCS – Process Control Systems
• Management Support Systems
• MIS - Management Information Systems
• DSS - Decision Support Systems
• EIS - Executive Information Systems
Outward Focus
• EWSMS - Enterprise Wide Strategic Management
Systems

IT Spending

• Global Manufacturing IT Spending $399 billion

(2004) to $466 billion (2009)

Source: Gartner Report

• US Automotive IT Spending increases from

$7.3 billion (2003) to nearly $8 billion (2008)
Source: Gartner Report

Goals of IT Spending

• Maintenance
• Productivity
• Growth
• Innovation

IT Decision Taxonomy

• Principles: high level statements about IT use
• Architecture: Integrated set of technical choices

• Infrastructure: base foundation of budgeted-for IT
capability
• Business Application Needs
• Investment and Prioritization

IT Architecture Evolution

• Application Silo
• Local optimization to meet specific business needs
• Standardized Technology
• Efficiency to meet knowledge worker needs
• Rationalized Data
• Process optimization through process integration, and
shared data
• Modular
• Make strategic choices based on needs

Correlating Governance and
Decisions*
Domain
Style
IT Principles IT
Architecture
IT
Infrastructure
Business
Application
Needs
IT
Investment &
Prioritization
Business
Monarchy 3 3 3 32
IT Monarchy 1
2
1
2
Feudal
Federal
31
Duopoly
1 2
2 1
Anarchy
* Peter Weill, “Don’t Just Lead, Govern: How Top Performing Firms Govern IT, CISR WP No. 341, March 2004

Development versus Sustainment

•Applications budget
• ≈ 40% of total IT budget; *
• As high as 60-90% of total IT budget+
•New Application Development
• 38% of application budget*
•Application Maintenance & Enhancement
•62% of application budget*
* IDC
+ Gartner, Forrester

Enterprise Information
Integration (EII)
External Web
Partners
Employees
Customers BizApp
Internal Database
Business
ApplicationLegacy CRM
Communication
Channels
How do we get disparate
systems to communicate?
Direct Transformation versus Canonical Transformation

Enterprise Application
Integration (EAI)*
• Definition
“The process of integrating multiple applications that were
independently developed, may use incompatible technology, and
remain independently managed.”
Business Intelligence
Business Process
Management
Messaging
Adapters
Provides real-time and historical data on performance
of processes and assists in making decisions.
Manages and tracks business transactions that might
span multiple systems and last minutes to days.
Ensures the reliability of data delivery across the
Enterprise or between systems.
Provides “open” connectivity into data sources while
allowing filtering and transformations of data.
*Integration Consortium.Org

Layers of Transformation

High
Degree of
business
transformation
Low
2. Internal integration
3. Business process redesign
4. Business network redesign
5. Business scope redefinition
Evolutionary levels
Revolutionary levels
HighLow
}
}
New business
Efficiency
1. Localised exploitation
- Transformate
Effectiveness
- Informate
- Automate
Range of potential benefits
(Source: MIT90s)

Risks in IS Implementation

• Lack of top management commitment to the
program
• Failure to gain user commitment
• Misunderstanding the requirements

The Pooh Analogy

Here is Edward Bear, coming downstairs

now, bump, bump, bump, on the back of his

head, behind Christopher Robin. It is, as far

as he knows, the only way of coming

downstairs, but sometimes he feels that there

really is another way, if only he could stop

bumping for a moment and think of it. -

Winnie-the-Pooh, A.A. Milne, 1926

CEO Frustration

“Like other chief executives, I feel I'm being
blackmailed. Not just by the suppliers, I
expect that. But by my own IT staff who never
stop telling me what the competition are
spending ...”
- Grindley K, Managing IT At Board Level, Pitmans
Publishing, p58, 1991.

The Successful CIO

• Attributes of a successful
CIO
• Versatility
• Vision
• Fast reactions
• Tenacity
• Multi-dimensional
• A technology champion
• A business strategist
• A technologist
• A leader
• An integrator
• An impresario
• A good corporate citizen
• A friend to all

Failure to Gain User Commitment

• “It’s always been done this way” syndrome
• Inadequate Training
• Job Security
• Politics

Alice in Wonderland*

Alice: `Would you tell me, please, which way I ought to
go from here?'
Cat: `That depends a good deal on where you want to get
to,'
Alice: `I don't much care where--'
Cat: `Then it doesn't matter which way you go,'

Alice: `--so long as I get somewhere,'

Cat: `Oh, you're sure to do that … if you only walk long

enough.'

*Excerpted From Chapter 6 Pig and Pepper, Alice’s Adventures in Wonderland, Lewis Carroll

Misunderstanding Requirements

• Legacy systems role
• Changing business environment
• Changing Leadership

Product Data Management*

• Two Cases

• Aero
• Space
*Erisa K. Hines and Jayakanth Srinivasan, “IT Enabled Enterprise Transformation: Perspectives Using Product Data Management”
Proceedings of ISD2005
Erisa K. Hines, “Lifecycle Perspectives on Product Data Management”, SM Thesis, 2005

Industry Spending on PDM/PLM

Aerospace investment has dropped
over the last decade, creating a
gap in the technology capability
and industry needs
Aerospace alone is an estimated $10.4
Billion market for 2005
– Daratech Report
“The aerospace companies want to shed IT
silos that can’t talk to each other, and the
vendors want to accommodate them with
suites of tools that can …exchange
data…”
– David Hughes, AWST, 2003
“PLM is an emerging technology with a
lot of growth in front of it. But it is mature
enough that the GMs of the world are
using it and that’s a confidence-building
factor”
– Bob Nierman, EDS
21%
Early 1990s
13%
2005
Aerospace Market Share of PDM/PLM
Aerospace Market Share of PDM/PLM

PDM’s Current Domain in the
Lifecycle
CONCEPT
MANU-
FACTURING
RETIREMENT
Suppliers
PDM
MRP
ERP
DESIGN
PRODUCT
SUPPORT
Customer
Partners
Lower Tier Suppliers
Low Tier Suppliers

PDM Usage
Traditional applications of PDM are distinct from
those that are not
(2004)
0%
Vaulting
D
oc
R
eleaseW
orkflow
M
gm
tProd
S
tructure
C
hange
M
gm
t
Visual
C
ollaboration
)
Current Functional Use of PDM
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Functionality
Percentage(Programs
nonPDM
PDM+
PDM

33%
8%
l HW/
24%
HW/
36%
36%
13%
7%
l
8%
SuppliersPrimes
PDM Spending Comparison
Across Five Categories
The majority of money is spent on developing
Process Dev
Consult
18%
Training, etc
Data Qua
17%
SW
SW
Process Dev
Consult
Training, etc
Data Qua
processes and the licensing costs


Data Management Pre-PDM
Implementation
Use of PDM to manage product data decreases
as the type of data progresses from design
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
C
AD
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eta
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otes
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ings
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odels
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ata
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ata
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ata
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aintD
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therD
ata
Schedules
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CM
Management of Data Elements Pre-PDM Implementation
Data Eements
Percentage(Programs
non-CM
PDM+
PDM

© 2005 Massachusetts Institute of Technology JK/October 31st 2005 - 32
C
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ent
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odels
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CM
Data Management Post-PDM
Implementation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
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MBOM is the
breakpoint, likely
due to other
business systems
There is an industry trend in
traditional engineering
http://lean.mit.edu
Management of Data Elements Pre-PDM Implementation
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
PercentagePrograms
non-CM
PDM+
PDM
Management of Data Elements Post-PDM Implementation
Data Eements
Percentage(Programs
non-CM
PDM+
PDM
using PDM to manage more
design data than in the past

The “Business Case” Value of
PDM
• Guaranteed Savings
• Reduction in Labor Costs
• Reduction/Elimination of Legacy IT Maintenance
• Expected Savings
• Cost Avoidance
• Reduction in errors, rework due to bad data quality
• Reduction in lost or missing data
• Improved Cycle Time

Context

Burning Platform
Number of
Programs
PDM Budget
Management
Turnover
Company Culture
Multi-CAD
Case Comparison: Context
Aero
Save the Business
Less than 5; large programs
Long-term strategy; Fully
' funded budget upfront
Very limited
Strong relative to industry
Yes, internally and
externally
Space

Save the Knowledge
Greater than 200; 5% large,
35% medium
Short-term strategy;
severely phased budget
Very often
Strong relative to industry;
more unique
Yes, externally

Efforts

Multi-site Effort
Data Model
Implementation
Team Make-up
Implementation
Approach
PDM Solution
Current Diffusion of
PDM Solution
Case Comparison: Efforts
Aero
Yes
Standard across programs
Engineering Driven; mixed
Phased by program
Nominal customizations;
standard across programs
Complete implementation
across the organization;
currently being migrated to
sister organization
Space

No
Standard across programs
IT Driven; mixed
Phased by capability and
program
Heavy customization of
user interface; less
standard across programs
Limited use within
programs; not implemented
to all programs

Case Study Lessons Learned

• One size does not fit all:
• The two cases used contrasting IT implementation approaches.
Their strategies were a function of resource availability,
management commitment and system understanding. The
approach adopted must reflect limitations imposed by the
organization, technology and culture.
• Authority to transform the enterprise:
• The team given responsibility for designing and implementing
the system must be given authority and the requisite budget to
drive change.
• Gaining user commitment:
• Not communicating the criticality of transitioning to the new
system is a common stumbling block in gaining user
commitment. This requires user involvement in the process
redesign as well as training of end users in the process
changes and in using the tool itself.
• Managing process evolution:
• A successful execution requires management of process
changes before, during and after system implementation.

an.mit.edu © 2005 Massachusetts Institute of Techno er 31st 2005 -
Product Lifecycle Management

“A strategic business approach that applies a consistent set of business solutions in the support of the
collaborative creation, management, dissemination, and use of product definition information across the
extended enterprise from concept to end of life – integrating people, process, business systems and
information (emphasis added)”
– CIMdata definition of Product Lifecycle Management
http://le JK/Octob
}
}
Evolutionary levels
Revolutionary levels
Low
High
1985 1990 1995 2000 2005
Localized Exploitation
Data/Technology
Functional Focus
Integration
Quality Focus
Process Focus
Enterprise Agility
Enterprise Return
CAD Data
Management
Product Data
Management
Product Lifecycle
Management
Lean Enterprise
companies are
logy
Efficiency
Automate
IncreasingEnterpriseValue
Cost Focus
Custom Implementations
Standardized Toolkits
Business Applications
Effectiveness
Business SolutionsEnterprise Capability
Most aerospace
still here.
37

Quoted

“I guess [the PDM is] working just fine.”
~PDM Budget Oversight personnel~
“There is no point in doing a value stream map and finding out
where improvements can be made, if you do not have the
authority and the funding to actually make changes”
~Senior Manager of Engineering~
“Everyone is into reducing waste and continuous improvement so
[Lean] becomes the change agent – the common language we
all speak to justify going to our (common) singular system.”
~VP of Engineering on Lean~

Implementation Approach
Framework
Product homogeneity
Legacy product data
Legacy IT
Maturity of the SW
Budget support
Management
Overall Implementation
Complexity
by Functionality by Program
Phase Big Bang Phase Big Bang
high x
low x
high volume x x
low volume x
high x x
low x
high x x
low x x
strong x x
weak x x
will enforce x x
won't enforce x x
high x x
low x x

Common Implementation
Mistakes
Unclear; not well Underestimated in
Biased; not well Avoided when this gets cut

understood user community possible

Requirements
Development
Tool Evaluation
and Selection
Process
Re-engineering
Training
Data Clean-up
and M
igration
Software
M
odification
Solution
Architecture Design
Deployment
communicated Short-sighted; not
holistic
time and effort
Software
Testing
Superficial;
performed without
Schedule crunch;
Not well developed
for users; poor
attendance
Premature;
understaffed

Takeaways

• Integrating the enterprise requires an

enterprise-wide information system

• Technology “imposes its on logic” on
strategy, culture and organization
• There is no “silver” bullet

• Everything you learn in ESD61 applies in the
IT Context as well!

Mapping Information Systems

• Transaction Processing Systems (TPS)

• Online processing
• Batch Processing
• Automate repetitive information processing
activity
• Increase speed
• Increase accuracy
• Greater Efficiency


• Management Information Systems (MIS)

• Managing Information Systems
• Information for Mid-Level Managers
• Provide reports
• Key-indicator report, Exception report, Drill-down report
etc.
• Examples:

• Sales forecasting, Financial Management and
Forecasting, Inventory Management, Manufacturing
Planning etc.http://lean.mit.edu © 2005 Massachusetts Institute of Technology JK/October 31st 2005 - 43


• Executive Information Systems (EIS)
• Used at the strategic Level
• Highly Aggregated Information
• Hard and Soft Data
• Facts, News
• Examples:
• Long range planning, Crisis Management

Functional Information Systems

• Decision Support Systems (DSS)

• Cross Layer Usage
• Designed to support organizational decision
making
• “What-if” analysis
• For example: Microsoft Excel
• Text and graphs
• Models for each of the functional areas

Enterprise Wide Strategic
Management Systems
• Enterprise Wide

• Synergizes the organisation and its customers and
suppliers
• Delivers competitive advantage
• Built on a platform
• Cannot be too quickly or easily copied

14 ent info_sys

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